On regular trends in rail transportation market consolidation
In summer, Russia's largest transportation company of bulk oil freights "TRANSOIL" announced his intention to purchase 100% stake in Neftetransport operator. Earlier, some more companies announced acquisition: in late 2013, the management company Railtransholding bought leasing company 3R, in 2012, the railway operator Globaltrans bought Metalloinvesttrans, the transport operator of Metalloinvest company, and the group NefteTransService acquired operators Evraztrans and Trans-M.
This process of asset consolidation is quite anticipated for the railroad industry. As a rule, in 20-25 years after the market grouping 5-10 major players occupy up to 80% of market share. In the past decade since the de-monopolization of the Russian railway industry, the top 10 operators hold 60% of the fleet of railcars and carry 70% of freight transportation.
Increasing Russia’s fleet of cars and decreasing in traffic volume have become an additional factor accelerating consolidation. Transportation companies are trying to secure their activities, ensuring themselves with a constant freight base.
The next stage of the consolidation process is the stage of so-called optimization, where companies dispose of assets beyond their core competence. The strategy of the players will change, as far as it is the economic benefit that takes center stage in the process of competitors’ acquisition, and not the takeover of market share.
Within the next 3-5 years, the Russian market may expect a number of new mergers and acquisitions with the involvement of large companies, then "short-list" of market leaders will be formed and it will be extremely difficult to get into it.
Leysana Korobeynikova, Senior Analyst
